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Prime property prices in Edinburgh increased by 1.2% in the first three months of 2015 as buyers looked to complete deals ahead of a new property tax. The quarterly rise comes on top of a 0.5% increase in the final quarter of last year and on an annual basis prices are up by 4.1%, according to the latest market report from real estate firm Knight Frank. The new Land and Building Transaction Tax (LBTT) came into force today (Wednesday 01 April), and this led to a rise in buyer’s interest which in turn has boosted prices, says Knight Frank. The report also points out that, as was the case for much of last year, tax policy continued to play a defining role in the city’s prime property market during the first quarter. Under the new LBTT regime which replaces stamp duty, those buying homes worth less than £333,000 will pay less tax, however for homes above this threshold the upfront cost of moving will increase. The number of sales completed by Knight Frank between January and March was 47% higher than the first quarter of 2014 and 66% higher than the first quarter of 2013. Knight Frank expects that following the introduction of LBTT there may be a period of adjustment at the top end of the market as individuals factor in the increased cost of moving. Forecasts from the Office of Budget Responsibility (OBR) appear to confirm this, with the fiscal watchdog recently revising its forecasts for future stamp duty and LBTT tax revenues. The OBR said that the bringing forward of some higher priced transactions in Scotland before April will increase UK stamp duty receipts by £11 million in 2014/2015. The OBR subsequently reduced its forecast for LBTT receipts in 2015/2016 by £20 million. ‘Buyers have been taking advantage of the short window when purchase costs are lower. The buyer of a property valued at £1 million will pay nearly £35,000 more in purchase taxes,’ said Edward Douglas-Home, head of Edinburgh city sales at Knight Frank. ‘However, even with the new higher purchase taxes, the relative cost of property in Scotland compared to London and the South of England means there is still a large effective discount for buyers making the move north,’ he added. Indeed, the number of Londoners looking to buy property in Edinburgh in 2014 nearly doubled compared to the previous year, highlighting the city’s ongoing appeal. Douglas-Home added that despite the challenges facing homes at the top end of the market, there is a more positive outlook for the residential property market as a whole, with favourable market conditions with interest rates remaining at record low levels, economic growth steady and mortgage rates competitive. Continue reading →
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